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Advancing service
in a digital age
Executive summary
Evolving segmentation
and service strategies
12
Conclusion
25
Executive summary
Americas (emerging)
Brazil, Colombia, Mexico
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Australia, Japan
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China, India, Indonesia,
Malaysia, Thailand
EMEA (developed)
France, Germany, Italy,
Netherlands, Spain,
Switzerland, United Kingdom
EMEA (emerging)
Nigeria, Poland, Russia,
South Africa, Turkey
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Evolving banking
landscape
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Customer segments
Increasingly Internationals
Traditionalists
Diverse and Dynamics
Service models
Dedicated banker
Access plus
Commercial access
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3.9
Mean number
of products used
2.6
Customer satisfaction
Delivering a consistently excellent customer experience to
mid-market customers remains problematic for most banks.
Customer experience management and customer satisfaction
tracking programs have yet to yield steadily strong results
across portfolios, and company executives continue to report
varying satisfaction levels with their primary banking provider.
Unsatised (04)
Neutral (5/)
When asked about reasons for not using online and mobile
channels more often, the most commonly cited concerns
related to security, slow speed and poor functionality (see
Chart 3). Additional security measures are the leading
enhancement customers believe would prompt more frequent
digital channel use while better functionality and the ability to
track the progress of transactions follow closely behind.
Digital banking
An increasing percentage of customers want to do more of
their banking via digital channels, and providers are starting
to embrace the change. New online2 and mobile3 channels
present a powerful combination of sales and servicing
opportunities, along with substantial delivery efciencies for
banks (see Chart 2). A key driver of satisfaction will be how
successful banks are in providing a platform that is secure
and meets customer expectations for both functionality and
ease-of-use.
Chart 2. Online and mobile banking use and satisfaction by geographic market
90
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80
79%
70
60
71%
62%
70%
72%
72%
63%
62%
60%
57%
71%
58%
50
40
38%
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36%
30
20
10
Overall
Americas
developed
Americas
emerging
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EMEA
developed
EMEA
emerging
APAC
developed
APAC
emerging
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or tablet device.
Chart 3. Obstacles to using online and mobile banking more frequently and features that would promote more frequent use
Obstacles to more frequent online/mobile use
39%
Security concerns
22%
17%
15%
None
19%
37%
37%
21%
Difcult to use
46%
25%
Poor functionality
48%
42%
Slow speed
Not available
32%
37%
31%
10%
30%
10%
19%
27%
26%
Nideo support
Nothing would prompt me
to use it more
Online
Mobile
18%
9%
Diminished loyalty
79%
70
60
57%
62%
60%
40
56%
54%
50
43%
49%
46%
40%
51%
44%
38%
30
20
21%
10
0
Overall
Americas
developed
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Americas
emerging
EMEA
developed
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EMEA
emerging
APAC
developed
APAC
emerging
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26%
17%
16%
15%
19%
10%
Overall
Americas
developed
Americas
emerging
EMEA
developed
EMEA
emerging
APAC
developed
APAC
emerging
[If no] Would you consider switching providers over the next
12 months?
53%
34%
36%
42%
40%
28%
29%
15%
18%
Overall
Americas
developed
Americas
emerging
EMEA
EMEA
developed emerging
APAC
developed
APAC
emerging
17%
18%
17%
15%
14%
16%
16%
10%
10%
5%
0%
Bank
Geographic Product
Access
reputation coverage capabilities to capital
Anticipated switch
15%
Pricing
Recent switch
RM
Other
strength
54%
82%
69%
44%
53%
23%
54%
77%
56%
47%
46%
46%
31%
18%
Overall
Americas
developed
Americas
EMEA
EMEA
APAC
APAC
emerging developed emerging developed emerging
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Technology transformation
initiatives
Investment in technology transformation is enabling
banks to respond to the evolving demands of the
marketplace faster and more efciently. Through this
investment, banks will be able to increase process
efciency, improve data quality, achieve service
consistency and strengthen risk management. Banks
have begun to focus their investment budgets in the
following key areas:
Digital imaging and e-signature capabilities, which
support faster transaction approval and processing
Document management solutions, which help to
rationalize various credit documents
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consistency, traceability and transparency
throughout the process
Digital relationship management, a web-based CRM
platform with mobile functionality, which can be
accessed by relationship managers while in the eld
Enterprise data management, which will improve
banks ability to capture and analyze data more
holistically
Non-bank alternatives
A number of banks have already increased their focus on midmarket companies. In addition, more rms from outside the
industry are entering the market. Non-banks have traditionally
competed in product categories that, while important to banks,
tended to be more specialized in nature. However, advances
in technology are allowing some non-banks to increase
the scale and expand the breadth of their nancial service
offerings. Long-standing alternative providers, such as credit
card issuers and insurance companies, are being joined by
telecommunications and technology companies, alternative
asset managers, peer-to-peer lenders and specialist internet
rms competing in core banking areas ranging from lending
and trade nance to foreign exchange and merchant services.
For incumbent banks, the competitive landscape for
commercial banking is becoming increasingly crowded.
Chart 8 shows a wide range of products and services that
executives would consider obtaining from a non-bank.
For example, while no single non-bank is likely to threaten
traditional institutions, almost one-third of mid-market
companies would consider a non-bank for a commercial loan.
Banks must continue to fend off these diverse competitors that
are seeking to win portions of commercial customers banking
business. This is especially true in emerging economies, where
the proportion of companies that use or would consider using
a non-bank is notably higher (see Chart 9). In our Global
Consumer Banking Survey 2014, we also found a greater
openness to use non-banks among retail consumers in the
emerging markets.
With increased competitive threats, pressures and
expectations, addressing some of these core issues will benet
all customers. However, as their needs continue to diverge,
more effective segmentation will be crucial to ensuring service
models are properly aligned with customers preferences and
growth potential to allocate limited bank resources efciently.
14%
32%
15%
32%
9%
31%
Cash management
10%
29%
10%
29%
Merchant services
10%
28%
Retirement/pension plans
11%
27%
Investment banking
10%
23%
10%
22%
7%
22%
9%
22%
Commercial mortgage(s)
7%
4%
14%
9%
0%
18%
Chart 9. Use and consideration of non-bank products and services by geographic market*
Overall
53%
38%
Americas
Developed
47%
Emerging
50%
36%
57%
EMEA
Developed
57%
Emerging
55%
48%
38%
APAC
Developed
37%
16%
71%
Emerging
Currently use a non-bank
59%
*Numbers do not add up to 100% as they are from different groups of respondents.
Evolving segmentation
and service strategies
Increasingly
Internationals
(36%)
On average, 41% of business is currently international, with an expected average of 53% over the next three years
Key selection criteria include bank reputation, innovative processes/services and willingness to customize offerings
Use an average of 6.7 products from their banks, including higher-margin offerings such as investment banking,
trade nance, cash management, foreign exchange and asset nance
Use an average of 3.71 banks
Largely savvy technology users with frequent online and mobile banking channel use (89% and 66%, at least weekly)
Simpler relationships with more straightforward strategic priorities revenue growth, cost reduction
Key bank selection criteria include relationship manager quality, competitive pricing and product/service quality
Traditionalists
(28%)
Diverse and
Dynamics
(36%)
Strategic priorities range from increased cash ow to revenue growth, capital expenditure and cost reduction
On average, 42% of current business is international, with an expected expansion to 48% over the next three years
26% use more than four banking products while 38% use fewer than three
75% access their banks online platform at least weekly with approximately 80% reporting satisfaction with the channel
55% utilize their banks mobile applications at least weekly; however, 27% do not take advantage of the technology
51% use fewer than three banks, 18% use more than four
Increasingly Internationals
Companies in the Increasingly International segment represent
the greatest growth and protability opportunities for banks.
However, a high-touch service model is required, centered
on strong relationship management and insight and enabling
the bank to help the company grow into its target markets.
These companies have a signicant international presence
and/or plans to expand further over the next three years.
They are technically savvy and generally comfortable
with digital platforms, preferring to conduct routine
account-servicing activities through digital channels, which
enables relationship managers to focus on strengthening
the relationship and address business issues. Increasingly
Internationals use higher-margin products, such as trade
nance and foreign exchange two to three times more than
any other segment.
International expansion
Banks serving the Increasingly
International segment must be aware
of companies current or anticipated
expansion beyond the country in
which they are based. Executives in
the segment report an average of 41%
of their business is currently being
conducted internationally, and they
expect that level to rise to 53% over the
next three years.
Traditionalists
Companies in the Traditionalist segment have more modest
growth ambitions, product requirements and potential fees
relative to their Increasingly International counterparts.
However, when serviced through an appropriate model with
the right approach and systems in place, the segment can
be protable for banks. To serve the segment protably,
banks need to equip and train Traditionalist customers to
self-serve where possible through a combination of enhanced
branch, online and mobile channels. These clients may expect
relationship managers to continue to play a role; however,
the banks should change the degree of their involvement.
Ultimately, there must also be an acknowledgement that some
customers in this segment may not be protable in light of
a particular banks business model and operating structure.
A level of attrition may therefore be necessary to deliver
acceptable returns.
100
50
2012
2013
2014
2015
2016
2017
2018
Source: World Islamic Banking Competitiveness Report 201314 The transition begins
Customer migration
Customer segmentation is critical to
properly align the needs of the customer
to the correct service model. However,
banks face additional challenges once
the segmentation process is complete,
including how best to manage the
transition of customers from one
segment to another. We believe there
are ve components to effective
customer migration:
1. Regular customer segmentation
analysis and review. Banks should
evaluate customer segments either
on a xed basis (every year) or
through an event-driven process to
ensure evolving customer needs are
properly understood and the right
service model is implemented.
2. Quarterly account meetings. These
meetings should be conducted with
the relationship manager(s), senior
bank management and any other
Chart 12. Key bank selection and performance metrics by customer segment
Increasingly Internationals
Traditionalists
Importance
Performance
Importance
Performance
Bank reputation
63%
67%
56%
53%
RM quality
62%
61%
61%
47%
Service quality
63%
61%
60%
50%
Product quality
65%
63%
59%
48%
Global reach
63%
58%
21%
32%
Industry/sector knowledge
63%
59%
42%
40%
61%
57%
43%
42%
60%
59%
46%
42%
60%
56%
34%
37%
59%
59%
43%
42%
58%
55%
43%
34%
Competitive pricing
64%
55%
57%
39%
56%
53%
53%
37%
55%
55%
34%
33%
Importance
Performance
Importance
Performance
Bank reputation
48%
46%
36%
38%
RM quality
42%
47%
28%
34%
Service quality
45%
46%
33%
32%
Product quality
46%
45%
30%
29%
Global reach
45%
49%
27%
33%
Industry/sector knowledge
40%
45%
22%
28%
44%
46%
10%
25%
43%
46%
36%
26%
44%
48%
28%
24%
42%
46%
30%
29%
47%
45%
27%
26%
Competitive pricing
44%
44%
27%
30%
43%
45%
28%
32%
41%
48%
26%
30%
Access plus
Commercial
access
Dedicated banker
In this service model, the digital and self-service channels
will be paired with a named senior relationship manager.
Customers want a banker who can advise them or act as a
sounding board on major strategic decisions and not have
just a transactional relationship. This service model allows
the customer to have a dedicated representative who has
intimate knowledge of the customers account, industry and
key stakeholders. The individual relationship managers should
also have the experience and connections within the bank to
be able to navigate the organization successfully in order to
deliver the right outcomes for customers. These senior-level
bankers will be focused on cross-sell rather than accountservicing activities, which should be handled through less
costly channels.
Access plus
This model features the availability of all of the 24/7 digital
and self-service channels for routine transactions, but also
includes access to a dedicated junior generalist relationship
manager. This generalist will be supported by a pool of
highly trained and specialized commercial bankers, as well as
a credit manager and risk ofcer. The teams will be collectively
equipped to address even the most sophisticated business
needs and provide meaningful advice.
Aspiring bankers can gain important relationship-building
experience overseeing between three and ve times the
number of accounts of the dedicated banker model as part of
a pooled-banker strategy. The relationship manager pool would
ideally be accessible at all times (based on a banks resources)
and have immediate access to a customers full account and
relationship information. Similar to the dedicated banker
model, it is essential that the RM pools are resources for
value-added activities and not allowed to become mired
in account-servicing that can take place through other,
lower-cost channels.
Critical to the success of the pooled-banker strategy are
effective CRM systems, clear rules of engagement and
reward/recognition programs that facilitate teams of
relationship managers and product specialists working
together seamlessly across transactions, products and points
of contact within the customer organization. Each customer
interaction must be approached with detailed understanding
of the company, its needs and the history of past bank
interactions. Many otherwise sophisticated banks still lack
sufcient CRM infrastructure and operating procedures to
execute an effective pooling strategy. Investment in this
technology, including a real-time customer relationship
dashboard and the necessary banker training, is yet another
call on scarce resources, but the efciencies that can accrue
through more streamlined banker allocation models should
outweigh the cost.
Enabling relationship
managers through technology
To support revenue growth, relationship managers must
be equipped with the proper technology and information
to enable them to be more effective, both as advisors
for customers and as business developers for the bank.
This should include a single view of a customers entire
footprint with the bank and, ideally, real-time updates
on transactions. Mobile solutions will ensure these are
available on the road as well as in the ofce.
Information on a customers customers and suppliers,
where that is available, will help the RM anticipate
customer requirements in areas such as supplier
nancing. Digital technology will also be needed to
minimize the amount of time the RM spends dealing
with basic transactions and servicing needs. Sales
and operations leadership must streamline processes
while demonstrating to bankers various ways that
new technology can benet them and their
customer relationships.
Technology that will help support bankers includes:
Straight-through processing
CRM systems
Covenant monitoring
Salesforce automation
Our experience has shown that, for most banks, this
transformational journey evolves over time, typically
spanning two to three years. The process touches
on technology, processes and functional roles across
the organization.
Commercial access
The commercial access model includes branch, digital and
self-service channels but excludes access to a relationship
manager. This model will aim to eliminate reliance on
relationship managers for day-to-day interactions and to
make greater use of emerging digital technology to shift
these activities to lower-cost self-service channels. These
can include self-service kiosks, call centers, online chat
rooms, video conferencing and access to how-to videos for
frequently asked questions. Within this model, it is important
to provide a simple, seamless and connected experience as
customers move across channels, so that they can easily
begin a transaction in one channel and continue in another.
When face-to-face interaction is needed for product inquiries,
service or more complex transactions, the customers will
have access to branch personnel, including the branch
manager. With this model, it is anticipated that there will be
fewer human interactions with customers, particularly faceto-face, so it is crucial that banks view each human interaction
as an opportunity to strengthen the overall relationship and
position new solutions.
Traditionalists
Diverse and
Dynamics
Default
As warranted
As warranted
Access plus
As warranted
Default
As warranted
Commercial access
By exception
As warranted
As warranted
Dedicated banker
Conclusion
The case for urgency
Banks face the challenge of adapting quickly to heightened
competition, rapidly changing technology and increased
regulatory scrutiny in the current environment. As the needs
and preferences of mid-market customers become increasingly
heterogeneous, banks must continue to evolve to avoid falling
behind. This calls for continuous customer monitoring to
understand how company executives are interacting with their
banks and making buying decisions.
In todays environment, regulatory pressure is often the
primary driver for change. As such, typical programs adopt an
inside-out approach that emphasizes regulatory compliance
achieved through technology, data and process change. We
believe this thinking should be turned on its head. An outsidein approach would be business-led, requiring only a marginal
incremental cost to deliver customer-centric products, services
and channels that address customer needs and also satisfy the
demands of regulators.
Contacts
Global
Bill Schlich
Global Banking & Capital Markets Leader
Toronto
william.schlich@ey.com
+1 416 943 4554
Ian Baggs
Deputy Banking & Capital Markets Leader
London
ibaggs@uk.ey.com
+44 20 7951 2152
Jan Bellens
Global Banking & Capital Markets Emerging
Markets and Asia Pacic Leader
Singapore
jan.bellens@sg.ey.com
+65 6309 6888
Steven Lewis
Global Banking & Capital Markets
Lead Analyst
London
slewis2@uk.ey.com
+44 20 7951 9471
Regional
Christopher Harris
Principal, North America Practice Lead for
Wholesale Banking
Chicago
christopher.harris@ey.com
+1 312 879 3269
Hugh Harper
Strategy, Customer & Operations Practice Leader,
EMEIA Financial Services
London
hharper@uk.ey.com
+44 207 951 4224
Noboru Miura
Banking & Capital Markets Japan Area Leader
Tokyo
miura-nbr@shinnihon.or.jp
+81 3 3503 1115
ey.com/commercialbanking